USD/JPY Trade Through 114.869 Shifts Momentum to Downside

The Dollar/Yen posted a potentially bearish outside move closing price reversal top on Monday, signaling that investors are taking safe-haven protection against a further slide in riskier assets.

The move took place despite reports that the financial markets are pricing in a 90% chance of a 25-basis point Fed rate hike later this month and a 37% chance of a 50-basis point rate hike.

On Monday, the USD/JPY settled at 114.963, down 0.572 or -0.50%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $81.56, up $0.41 or +0.51%.

Increasing odds of a Fed rate hike have made the U.S. Dollar a more attractive investment, taking the Dollar/Yen to a multi-year high recently, but the Russian invasion of Ukraine has wreaked havoc on riskier assets, dampening the bullishness of the USD/JPY.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but Monday’s closing price reversal top indicates momentum may be getting ready to shift to the downside. Furthermore, a potentially bearish secondary lower top may be forming, which could lead to a change in trend.

A move through 114.869 will confirm the closing price reversal top. This will shift momentum to the downside. A trade through 114.411 will change the main trend to down.

Taking out 115.780 will negate the closing price reversal top and signal a resumption of the uptrend.

The first minor range is 114.411 to 115.780. The USD/JPY closed under its pivot at 115.096, making it resistance.

The short-term range is 116.339 to 114.411. Its pivot at 115.375 is also resistance.

On the downside, the nearest support zone is 114.442 to 113.992. This is followed by the main retracement zone at 113.583 to 112.931.

Short-Term Outlook

The direction of the USD/JPY early Tuesday is likely to be determined by trader reaction to 115.096.

Bearish Scenario

A sustained move under 115.096 will indicate the presence of sellers. Taking out 114.869 will confirm the closing price reversal top. This could trigger an acceleration into 114.442, followed by 114.411.

Taking out 114.411 could trigger another acceleration into 113.992.

Bullish Scenario

A sustained move over 115.096 will signal the presence of buyers. This could trigger a surge into 115.375. Overtaking this level will put the USD/JPY in a position to challenge 115.780. Taking out this level could trigger an acceleration into 116.339 to 116.345.